Question

Simpson, age 45, is a single individual who is employed full-time by Duff Corporation. This year Simpson reports AGI of $69,600 and has incurred the following medical expenses:

Dentist charges	$	1,430
Physician charges		2,220
Optical charges		560
Cost of eyeglasses		670
Hospital charges		3,300
Prescription drugs		695
Over-the-counter drugs		800
Medical insurance premiums (not through an exchange)		945

a. Calculate the amount of medical expenses that will be included with Simpson's itemized deductions after any applicable limitations.

b. Suppose that Simpson was reimbursed for $250 of the physician's charges and $1,200 for the hospital costs. Calculate the amount of medical expenses that will be included with Simpson's itemized deductions after any applicable limitations.

Answer 1

Calculation of the amount of medical expenses that will be included with Simpson's itemized deductions after any applicable limitations:

Decduction amount is expenditure in excess of 10% of AGI

Over the counter drug is not a qualified expense and all other expenses are qualified

10% of AGI = 69,600*10%

= $6,960

Qualified Expense

Particulars		Amount
Dentist charges	$	1,430
Physician charges		2,220
Optical charges		560
Cost of eyeglasses		670
Hospital charges		3,300
Prescription drugs		695
Medical insurance premiums (not through an exchange)		945
Total		9,820

Amount of medical expenses that will be included with Simpson's itemized deductions after any applicable limitations is excess of 10% of AGI = 9820 - 6960 = $2,860.

b) Calculation of the amount of medical expenses that will be included with Simpson's itemized deductions after any applicable limitations in case where the reimbursement of $250 of the physician's charges and $1,200 for the hospital costs is made:

The Qualified Medical expense will reduce by the reimbursement amount i.e $250 of the physician's charges and $1,200 for the hospital costs

Qualified Medical expense = $9,820 - $250 - $1,200 = $8,370.

Amount of medical expenses that will be included with Simpson's itemized deductions after any applicable limitations is excess of 10% of AGI = $8,370 - $6,960 = $1,410